Sources: U.S. Equity: Russell 3000® Index, Non-U.S. Equity: Russell Developed ex-U.S. Large Cap Index, Emerging Markets: Russell Emerging Markets Index, U.S. Bonds: Barclays U.S. Aggregate Bond Index, Global REITs: FTSE EPRA/NAREIT Developed Real Estate Index, Commodities: Bloomberg Commodities Index, Balanced: 30% U.S. Equity, 20% Non-U.S. Equity, 5% EM, 35% Bonds, 5% REITs, 5% Commodities
Buoyed by improved economic expectations in Europe, non-U.S. equities (represented by the Russell Developed ex-U.S. Large Cap Index) led in February with a return of 6.1%, surpassing U.S. equities
(represented by the Russell 3000®
Notably, non-U.S. equities outpaced U.S. equities
even despite the continued strengthening of the U.S. Dollar in February. Over the last 12 months, the U.S. Dollar has strengthened by 16% versus a basket of international currencies (based on the difference in returns of the Russell Developed ex-U.S. Large Cap Index in U.S. Dollar and local currency terms in February). In U.S. Dollar terms then it comes as little surprise that U.S. stocks have outperformed non-U.S. stocks for the last 12 months. But, in local currency terms (eliminating the effect of the strengthening U.S. dollar), non-U.S. stocks were up 15.5%. It reveals the potentially strong return of non-U.S. stocks
while also highlighting the impact currency can have in the short-term.
U.S. bonds (represented by Barclays U.S. Aggregate Bond Index) posted negative returns in February, coming in at -0.94%, after having experienced a strong start to the year
. Expectations for higher fixed income interest rates
amplified and rose slightly, which had negative effects on bond market prices
Within real assets, global real estate (represented by FTSE EPRA/NAREIT Developed Real Estate Index) was negative for the month after a strong January
, but commodities (represented by the Bloomberg Commodity Index), which were up 2.6% in February, rebounded somewhat as oil prices (represented by CLJ15 Crude Oil WTI NYMEX Price Index) rose slightly from their most recent low. Unfortunately, though, even February’s stronger oil prices
did little to counteract the 12 months’ oil price deluge.
The hypothetical balanced index portfolio fared well
in a month of mixed returns. It returned 2.9% in February and was up a respectable 5.9% on a 12-month return basis, helping to illustrate the value of being diversified and investing in a range of different asset classes.
Asset Class Dashboard – February, 2015
The Asset Class Dashboard
portrays the last 12-month market environment as very much “in the typical range” that we would expect in the context of historical returns. Commodities remain the only outlier, coming in below the historically typical range
for that asset class. Going forward, we would expect the 12-month return of commodities to be more typical as oil finds its new equilibrium price.
Large cap U.S. equity: Russell 1000 Index, Large cap Defensive U.S. equity: Russell 1000 Defensive Index, Large cap dynamic U.S. equity: Russell 1000 Dynamic Index, Small cap U.S. equity: Russell 2000 Index, Non-U.S. Equity: Russell Developed ex-U.S. Large Cap Index, Global equity: Russell Developed Large Cap Index, Emerging markets: Russell Emerging Markets Index, Commodities: Dow Jones – UBS Commodity Total Return Index, Global infrastructure: S&P Global Infrastructure Index, Global real estate: FTSE EPRA/NAREIT Developed Index, Cash: Citigroup 3-Month U.S. Treasury Bill Index, Global high yield bonds: Bank of America Merrill Lynch (BofAML) Global High Yield Index, Emerging markets debt: JP Morgan Emerging Markets Bond Index Plus, U.S. bonds: Barclays U.S. Aggregate Bond Index.
How do I read this chart?
This dashboard is intended as a tool to set context and perspective when evaluating the current state of a sample of asset classes.
The ranges of 12 month returns for each asset class are calculated from its underlying monthly index returns. The stated inception date is the first full month of an index's history available for the dashboard calculation.
Here is how to read the graphic on this page:
FOR EACH INDICATOR, THE HORIZONTAL BAR SHOWS FOUR THINGS
A GRAY BAR shows the full range of historical rolling 12?month returns for a sample of asset classes.
A BLUE COLOR BAND represents the typical range (one standard deviation away from the mean, i.e. 68% of historical observations) of rolling 12-month returns for these asset classes.
AN ORANGE MARKER represents the most recent 12?month return of the asset classes.
A WHITE LINE within the blue bar represents the mean of the historical observations.
The bottom line
February is the shortest month of the year – and it’s only one month of the year, and only the second one in 2015. So, while it’s important to keep an eye on market developments and their impact on returns, help your clients contextualize this snapshot in time against their long-term goals.